Oregon Crowdfunding Law – A Better Way?

I just got off the phone with a lawyer in Oregon’s Department of Finance and Corporate Securities and I am quite enthused with what they are doing with Oregon’s crowdfunding law.    Like Washington, the company using the law must be incorporated in the home state. But the level of agency review is much more limited than in Washington.  Under Oregon DFCS Rule 441-035-0110, the issuer must file a notice with the DFCS at least seven days before beginning an offering or publishing an advertisement.  The Notice must contain information about the company and the offering but the disclosure is not onerous.

Other differences from Washington’s 2023

  • $250,000 maximum (Washington’s is $1,000,000)
  • $2,500 maximum individual investment (wealthy people in Washington can invest up to 10% of their income)
  • Must meet in person with a business technical service provider (nothing like this in Washington)
  • Reports to shareholders do not have to be made publicly available (a big negative of Washington’s law)
  • No escrow requirement (another negative of Washington’s law)
  • Disclosure document must state offering minimum amount, if any.  (I.e., you don’t necessarily need minimum commitment before you close the round.  In Washington, you do.)

Oregon’s law, in contrast to Washington’s, was passed by rulemaking, not by statute, so you know it has the support of the Oregon DFCS.  And unlike Washington, their law is being used. I found at least eight or nine Oregon companies that are using the rule to raise money.  Obviously, this law won’t help Washington companies, but if it is successful in Oregon, perhaps authorities here in Washington will see feet to making changes in our law.

Oregon’s crowdfunding rules and a FAQ prepared by the DFCS can be found here:  http://www.dfcs.oregon.gov/securities/raise_capital.html

 

Washington Crowdfunding is here!

The Washington Department of Financial Institutions promulgated its final rules today (October 2, 2014) for ESHB 2023, known as the “Washington Jobs Act of 2014″.   You can find the final rules and the final crowdfunding application form here.  This means that Washington intrastate crowdfunding is here and ready to go as of November 1, 2014, when the rules will be effective.

The law was actually passed last March, but the law required the stated Department of Financial Institutions the responsibility of promulgating rules to implement the Act.  The DFI got right on the task, has published both draft and proposed rules and accepted comments on them.  Last week Carter testified at the final public rulemaking hearing and followed up with written comments about one troubling rule in particular, which is the requirement to make financial statements, executive compensation, and large shareholder ownership available to the general public after the offering closes.  You can read Carter’s written comments here.  For some of the things you should consider before doing a Washington crowdfunding, see Carter’s post here.

Invest Visa/Entrepreneur Visa Chart (Startup Visa, EB6, X-visa)

The newly proposed Invest Visa, formerly known as the Startup Visa, creates two new visa categories: X-visa and EB6 visa.  Here is a visual aid to understanding it better. In my opinion, this is an important and commendable addition to the bill.  See today’s Wall Street Journal article on the topic. http://blogs.wsj.com/venturecapital/2013/06/05/why-vcs-and-foreign-founders-want-the-entrepreneur-visa/

Here is a chart I created to help summarize the provisions. So many people have asked me about this that the chart should give a good easy overview of the new visas.  I still believe some amendments are necessary.  More to come on that in the next few weeks, stay tuned! We would love to hear from you if you have thoughts about the Invest Visa.  In addition, if you want to support these provisions, then please email me at tahmina@watsonimmigrationlaw.com.  We would love to hear from you.

Invest Visa Flowchart created by Tahmina Watson

Invest Visa Flowchart created by Tahmina Watson

Startup Visa Provisions under Comprehensive Immigration Reform Bill 2013!

he comprehensive immigration reform bill 2013 finally provides the long and anxiously awaited Startup Visa Act provisions.  Titled – Investing in New Venture, Entrepreneurial Startups and Technologies, the provisions include a non-immigrant visa category and an immigrant visa category.

qualified entrepreneur can apply for this visa.  A qualified entrepreneur means:

  1. Has significant ownership in a US business
  2. Is employed in a senior executive position
  3. Submits a business plan to the USCIS, and
  4. Had a substantial role in the founding or early stage growth and development of such US business entity.

Invest Non-Immigrant Visa:

  • Initial admission for 3 years
  • May be renewed for an additional 3 years, if during the most recent 3 year period alien did the following:
    • Created at least 3 full-time jobs AND received $250,000 qualified investment.

OR,

  • Created at least 3full-time jobs AND during the 2 year period ending on the date extension applied for generated at least $200,000 annual revenue.
  • May obtain a renewal for up to 2 one-year periods for a waiver from the above if the alien has made substantial progress and that such renewal is economically beneficial to the US.

Invest Immigrant Visa: There are 2 types:

First

  • Must be qualified entrepreneur
  • Maintained valid non-immigrant status in the US for at least 2 years.
  • During the 3-year period ending on the date extension filed alien has
    • Significant ownership in a US business entity that has created at least 5 full-time jobs AND has received $500,000 qualified investment in the alien’s business.

OR,

  • Has significant ownership in US business that created at least 5 full-time jobs AND generated at least $750,000 annual revenue during the last 2 year period. AND, no more than 2 other aliens have  received non-immigrant invest visa status on the basis of alien’s ownership of such business.

Second

  • Must be qualified entrepreneur
  • Maintained valid non-immigrant status in the US for at least 3 years prior to filing for such status.
  • Holds an advanced STEM degree, AND
  • During the 3-year period ending on the date the alien files petition under this section:
    • Alien has significant ownership in US business that created at least4 full-time jobs. AND received qualified investment of at least $500,000

OR,

  • Alien has significant ownership in US business that created at least 3 full-time jobs. AND during the 2-year period ending on such dategenerated at least $500,000.

At first reading, these provisions seem reasonable to me and I think will greatly benefit the US economy.  It does not restrict the type of business entity will have.  There is no percentage of ownership of business. 

As I read more and understand more, I will update this article. In the interim, the above provisions sum up a great addition to immigration reform.

*Copyright 2013 by Watson Immigration Law. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

 

Startup Law Talk Workshop on Equity Compensation a Success!

On February 11, 2013 Startup Law Talk’s legal workshop series was on the topic of equity compensation. There was a great turn out and our excellent speakers provided invaluable guidance in their presentation. Today our own Carter Mackley and Deniz Kiral presented on these issues.

Our next event is on February 26th in Fremont. Click here for more information.

Thanks to Carter and Deniz for their wonderful presentation and to all the people who attended today. We look forward to seeing you next time.

For photos, check out this link

IP Legalese – Translating for Startups

dictionary

At our March Workshop held at Eastside Incubator we had a lively discussion on the following topics:

  • Basics of IP – how to know the difference between trademarks, copyrights, and patents.
  • IP Management – how best to protect your IP on a startup budget.
  • IP Ownership – learn what agreements you should have in place to keep your IP in house.
  • IP Taxation – a brief overview of IP Tax considerations for the startup entrepreneur.

Thanks to all for participating.  See you next month.

Why We Need Start-Up Visa Laws for Immigrant Entrepreneurs

 The below article was originally published on Watson Immigration Law Blog. The article drew attention from Yahoo! News, The San Francisco Chronicle, The Boston Globe and many other press outlets. 

Why We Need Start-Up Visa Laws for Immigrant Entrepreneurs

–          Tahmina Watson, immigration attorney

With the recent election, America’s voters have placed renewed trust in President Obama, and immigration remains a hot topic.  In the days following the election, there was already chitter-chatter about comprehensive immigration reform in 2013. Wouldn’t that be great! I will look forward to this dream finally becoming a reality.  In the meantime, I hope the effort to accommodate immigrant entrepreneurs will continue.

This is not a complex issue; in fact, it can be distilled to a single cogent point: there is global competition for immigrant entrepreneurs. Every country wants the next Facebook, Google or Microsoft founder. The United States is in this bid for top talent too, except that the US is very slow in acting, and as a result, companies in the US are failing to recruit and maintain many talented people. 

Students from all over the world come to the US to be educated at the best schools, but they are not allowed to remain in the US—either because there is no suitable visa or not enough of the existing visas. As a solution to this specific problem, the  Science, Technology, Engineering and Math (STEM) Jobs Act introduced on September 18, 2012 by Rep. Lamar Smith created a new visa category for foreign PhD and Masters-level graduates in the STEM fields. Regrettably, the bill failed miserably at the time. However, the bill was approved by the House on November 30despite strong opposition from the Obama administration and now there may be hope it could pass through the Senate. Time will tell.

Perhaps even more frustrating is the fact that the path to a green card is excruciatingly difficult and slow, even for someone lucky enough to have obtained a work visa.  The past year has seen some erratic movement in visa availability. Visa availability is based on the Visa Bulletin, a monthly report issued by the Department of State and divided into ‘all countries,’ ‘India,’ ‘China,’ ‘Mexico’ and ‘Philippines.’ It is also divided into preference categories based on educational level. For example, categories include employment-based (EB) first preference (someone who has extraordinary qualifications such as winning a Nobel prize), second preference (someone with an advanced degree), third preference (someone with a bachelor’s degree) and so on. Also, the number of visas available varies according to the number issued in the previous month. Unfortunately, this can result in a decades-long wait. To reduce such waiting times, The Fairness to High-Skilled Immigrants Act introduced on September 22, 2011 by Rep. Chaffetz , sought to eliminate the per-country numerical limitations for employment–based immigrants and change the per-country numerical limitations for family-based immigrants. The bill failed.

Take, for instance, what happened in July 2012. The Visa Bulletin reported a three-year retrogression in the EB second preference category for ‘all countries.’ This particular category traditionally has not had any wait. Visas only became ‘current’ or ‘available’ in November 2012. This blow came soon after an announcement that there were simply no visas available for people with advanced degrees from India and China. The system is clearly in need for an overhaul; it does not provide viable options for entrepreneurs.

Various versions of the Start-Up Act provide visas and green cards specifically for entrepreneurs. In 2010, Senators John Kerry and Dick Lugar introduced the original Start-Up Act. In 2011, a variation of the bill was introduced by Sen. Jerry Moran to no avail.  And in May 2012, Senators Mark Warner, Marco Rubio, Chris Coons and Moran introduced the Start-Up Act 2.0. But none of these has been enacted as law. For anyone wondering why we need new law, here is a summary of the existing options for the self-employed entrepreneur:

EB5 Immigrant Investor visa:

The current investor visa program established in 1990, allows for immediate permanent residence for those who: (1) invest $1 million in any business in any part of the US and generate 10 jobs; or (2) invest $500,000 in a targeted employment area or a regional center and generate 10 new full-time jobs.  The law defines a targeted employment area as either rural or in a location of high unemployment. 

The bootstrapped, hardworking, talented and creative entrepreneur generally does not have the amount of money required here. This visa is for the investor who is not interested in being the next Facebook founder, who wants to ‘dump’ money in a safe and successful project that will allow him or her to fulfill the requirements to obtain a green card.

The E-2 Treaty Investor visa:

Citizens of countries with which the US maintains a treaty of commerce and navigation can apply for the E-2 visa.  This is a great visa for someone with the financial ability to open a business in the US.  Yet it has its limitations. The amount of money required for a successful visa is around $100,000.00 minimum, even though the law simply requires a ‘substantial’ investment. More importantly, the visa only enables one to own and run the business, so it is not a path to permanent residency.  As long as you have the business, you are permitted to live and work in the US.  The second problem is that not all countries maintain the required treaties with the US. So, the majority of graduates and high-skilled workers coming from India and mainland China are not eligible for the visa. I see many clients who are otherwise eligible but cannot benefit from this visa.

H-1B Specialty Occupation:

In August 2011, the US Citizenship and Immigration Services (USCIS) announced a policy shift in approving business owners to apply for H-1B visas with proof of an employer-employee relationship \ between the owner and the company. The new policy has been a success and many entrepreneurs have benefited.   

However, there are still problems with the policy.  H-1B visas have many stringent requirements, including proof that the owner will be paid the prevailing wage as a salary. The typical start-up company does not always have the funds for this. In addition, USCIS has challenged practically every aspect of such petitions. This has resulted in denials even for obviously approvable cases.

L-1 intracompany transferee:

This is a well utilized visa allowing certain personnel to transfer from a foreign branch to the US as long as they have worked for the foreign branch for at least one year in the past three. However, recently almost all L visas for new companies have faced incredible scrutiny and unreasonable denials.

This visa simply does not fit the circumstances of most entrepreneurs. An applicant must have worked in an overseas branch of the company for at least one of the last three years, whereas most entrepreneurs who want to open a business in the US are either present as a student or on other visa and not transferring from a foreign branch to the US.

O-1 visa:

Dubbed the ‘genius’ visa, the O-1 visa is reserved for those who can prove that they are at the top echelon of their profession and are indeed ‘extraordinary’. Some of the requirements include proving that the applicant has acquired national or international acclaim, that they have been written about in the media, that they have judged people in their expertise, they made significant contribution in their field, etc.

However, the evidentiary documentation to prove such a high burden is extremely difficult. In addition, not all entrepreneurs would be able to fulfill such requirements because starting a new company does not necessarily require one to be a ‘genius’.

National Interest Waiver for entrepreneurs: 

When the above H-1B policy change was announced, the USCIS also announced that they would allow entrepreneurs to apply for green cards under the existing National Interest Waiver (NIW) law. NIW is typically utilized by medical researchers who can prove that their research will benefit the nation (for example, finding a cure for cancer). The new policy suggests that if an entrepreneur can demonstrate that her business will benefit the economy on a national level, she will be approved for permanent residency. 

In theory, it makes sense to utilize existing laws while new laws are being debated. The approach is commendable. However, as yet there are no success stories. In a recent inquiry made with USCIS, I was informed that there is no way to identify such cases.

Nevertheless, the biggest problem in these petitions is a more fundamental issue: whether the entrepreneur can prove that his or her venture will have nationwide benefits. In my opinion, a typical start-up company may generate jobs locally, but may not be able to meet the waiver’s requirement that the benefit be national in scope.

There is an additional problem. NIW falls under the EB2 preference which typically has a several year waiting period for citizens of India and China.  Many of my clients are from India and they are often already in the visa waiting game as described above in EB2 or EB3 preference categories.  Applying for NIW does not assist them obtaining a green card faster.

Entrepreneurs in Residence (EIR):

To its credit, the USCIS has been working on an initiative called Entrepreneurs in Residence (EIR), launched in February 2012. The initiative seeks to evaluate current laws and regulations so that the Service can create policy updates for existing visas in accordance with the modern and practical business world. For example, the program will assess whether there is a way in which one can apply for an H-1B visa and perhaps show stocks and equity in the business instead of cash in the bank for wages.

While I commend and welcome the EIR initiative as an interim solution, the system is not quick. On November 28, 2012, the USCIS launched ‘Entrepreneur Pathways’, an online resource guiding immigrant entrepreneurs about various visa options. The White House blogged about the intention to have fair adjudications on such petitions as did the USCIS on its blog. However, as yet there is no legal guidance on how existing laws will be interpreted to help meet stringent visa requirements. Hopefully, legal guidance is imminent.

* * *

Each of the above visas has its place in the immigration system.  The existing visas work well for certain cases. However, they are not suitable for the average immigrant who wants to start a new business venture, who seeks to grow the business and create new jobs. All the visas above assume that a huge amount of money is required to create a new business. Perhaps traditionally that was the case. But in the modern world of snazzy technology and broadband internet, one does not need much money to start a successful business. Facebook and Google are examples of such success, started by founders during college and graduate school, respectively.  Immigration policies must reflect that too.

Therefore new laws are essential in holding onto the talented people who can create jobs and boost our economy. A version of the Start-Up Act is likely to do just that. It is a win-win solution for both the immigrant and the US. I urge Congress to take this issue seriously and pass new laws as soon as possible to help the US to maximize the competitive advantage engendered by the hard work and new know-how in the hands of highly capable foreign entrepreneurs. Growth of the US economy will depend on it.

Tahmina Watson is an immigration attorney and founder of Watson Immigration Law in Seattle Washington. Her practice has a strong focus on immigrant entrepreneurs and start-up companies. She can be contacted at tahmina@watsonimmigrationlaw.com. You can visit www.watsonimmigrationlaw.com to learn about Tahmina and her practice.

Check out our Facebook page!

If you’re on Facebook, make sure to check out our page at Startup Law Talk for more information, alerts, new articles, and links to other useful sites.  Click “like” and be in the know for all of our content.

Tahmina Watson quoted in Seattle Times article on Startup Act 2.0

Startup Law Talk immigration specialist Tahmina Watson was quoted in this article in the Seattle Times about Startup Act 2.0.  Seattle is full of immigrant entrepreneurs who start companies and create jobs for others.  These entrepreneurs will benefit from passage of Startup Act 2.0, as well as the employees and business partners of the companies they create.

U.S. Citizenship and Immigration Service  eased visa restrictions on immigrant entrepreneurs last year but Watson is among those who would like to see further changes to the system.   Immigrant entrepreneurs can now get H-1B visas, it is extremely difficult for these business owners to remain in the U.S. beyond the six years typically allowed.  There is no easy path to a green card for self-employed entrepreneurs.   Hopefully the Start-Up Act 2.0 will address that.

Entrepreneurs in Residence Program By USCIS

As Congress ponders on what to do to keep entrepreneurs in the US on legal visas, the United States Citizenship and Immigration Services (USCIS) has started their own efforts to improve the current immigration system.  To this end, USCIS launched “Entrepreneurs in Residence” (EIR) program in February 2012.  The USCIS invited business mogals, think-tanks and practitioners to discuss the current system and how to improve existing laws and regulations (that do not require approval from Congress).  Here is a link to information on the EIR launch.

Since the launch, there has been steady information towards the hope of real progress. In April 2012, USCIS introduced their tactical team. On July 30th, there will be conference in Atlanta, GA on this matter where USCIS Director Mr. Alejandro Majorkas will provide an update to their findings so far.

It is hoped that USCIS will offer ways to make the current immigration visa options entrepreneur friendly.  For example, an H1b visa has strict rules for proving that the beneficiary (the immigrant) will be paid a minimum prevailing wage. Yet, many start-up companies cannot afford to pay that amount of money. So, what other alternatives might suffice to fullfill those visa requirements?

I am monitoring this topic closely and will provide updates in due course.